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Session 2008 - 09
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Finance Bill



The Committee consisted of the following Members:

Chairmen: Mr. Peter Atkinson, Mr. Jim Hood, Sir Nicholas Winterton
Bailey, Mr. Adrian (West Bromwich, West) (Lab/Co-op)
Barlow, Ms Celia (Hove) (Lab)
Binley, Mr. Brian (Northampton, South) (Con)
Blackman, Liz (Erewash) (Lab)
Blizzard, Mr. Bob (Waveney) (Lab)
Bone, Mr. Peter (Wellingborough) (Con)
Breed, Mr. Colin (South-East Cornwall) (LD)
Brown, Mr. Russell (Dumfries and Galloway) (Lab)
Browne, Mr. Jeremy (Taunton) (LD)
Cable, Dr. Vincent (Twickenham) (LD)
Dobbin, Jim (Heywood and Middleton) (Lab/Co-op)
Duddridge, James (Rochford and Southend, East) (Con)
Engel, Natascha (North-East Derbyshire) (Lab)
Field, Mr. Mark (Cities of London and Westminster) (Con)
Flello, Mr. Robert (Stoke-on-Trent, South) (Lab)
Gauke, Mr. David (South-West Hertfordshire) (Con)
Hands, Mr. Greg (Hammersmith and Fulham) (Con)
Hoban, Mr. Mark (Fareham) (Con)
Hosie, Stewart (Dundee, East) (SNP)
Howell, John (Henley) (Con)
Jenkins, Mr. Brian (Tamworth) (Lab)
Joyce, Mr. Eric (Falkirk) (Lab)
McCarthy-Fry, Sarah (Exchequer Secretary to the Treasury)
Moffatt, Laura (Crawley) (Lab)
Pearson, Ian (Dudley, South) (Lab)
Pugh, Dr. John (Southport) (LD)
Robertson, John (Glasgow, North-West) (Lab)
Roy, Lindsay (Glenrothes) (Lab)
Seabeck, Alison (Plymouth, Devonport) (Lab)
Soulsby, Sir Peter (Leicester, South) (Lab)
Stuart, Mr. Graham (Beverley and Holderness) (Con)
Syms, Mr. Robert (Poole) (Con)
Timms, Mr. Stephen (East Ham) (Lab)
Todd, Mr. Mark (South Derbyshire) (Lab)
Liam Laurence Smyth, Committee Clerk
† attended the Committee

Public Bill Committee

Thursday 25 June 2009

(Morning)

[Mr. Peter Atkinson in the Chair]

Finance Bill

(Except clauses 7, 8, 9, 11, 14, 16, 20 and 92)

Clause 112

VAT exemption for gaming participation fees
9 am
Question proposed, That the clause stand part of the Bill.
Mr. Greg Hands (Hammersmith and Fulham) (Con): May I start by welcoming you back to the Chair, Mr. Atkinson. I also welcome the new Exchequer Secretary because this is the first opportunity I have had to do so. It seems like only yesterday—perhaps it was yesterday—that we welcomed her predecessor. In fact, it was only last Tuesday that I welcomed the hon. Member for Burnley (Kitty Ussher) to the role, while we were debating the MEPs’ pay clause. She got the chop after just nine days, making her the Lady Jane Grey of the Treasury. However, I wish the new Exchequer Secretary well. The Treasury desperately needs some stability at this time of record deficits, rapidly increasing unemployment, open warfare with the Bank of England and unhelpful directives from the EU.
Mr. Jeremy Browne (Taunton) (LD): Is it not salutary to reflect that Government borrowing went up by more than £3 billion during the tenure of the previous Exchequer Secretary?
The Chairman: Order. I hope that we can conduct this sitting in a more ordered fashion. We are discussing clause 112. We have had our fun now.
Mr. Hands: It is worth saying that since the publication of the Finance Bill, five Ministers have had responsibility for North sea oil, whether on a permanent or semi-permanent basis. The Exchequer Secretary appears to be well-trained as she approaches her portfolio.
The Chairman: Order. I have made it clear that we have gone far enough. The hon. Gentleman is taking liberties with my patience.
Mr. Hands: Thank you, Mr. Atkinson. Clause 112 represents the other side to the Government’s measures on bingo, although it will also have some effect on games such as poker. That impact will become clearer when we discuss clause 113. Hon. Members will remember the debate in the Committee of the whole House on 13 May on clause 20, which will raise bingo duty on gross profits from 15 to 22 per cent. Clause 112 will remove the VAT on participation fees, which are the up-front charges that players pay to enter the game. The Government argue that by introducing those two measures simultaneously, they will reduce the bingo industry’s effective rate of taxation.
The Government have trumpeted the generosity of these provisions, but as I explained to the Committee of the whole House, in practice, they are nothing of the kind. Bingo operators have argued for years that the VAT on participation fees was unfair and impermissible under EU law. Following a VAT tribunal hearing last year, which was discussed in some detail under clause 20, most bingo operators have withheld their VAT payments, especially on interval bingo. Operators such as Top Ten Bingo have withdrawn or withheld VAT altogether.
In the Committee of the whole House, the then Exchequer Secretary, the hon. Member for Wallasey (Angela Eagle)—just to be quite clear, that is going back two Exchequer Secretaries—was forced to admit that the figures in the Red Book were based on the Government’s interpretation of the law and what they thought should be paid, rather than on actual receipts. In practice, every operator believes that they will pay more tax as a net result of the changes in clauses 20 and 112. However, she stuck terrier-like to the theory and shunned what was happening with VAT in practice. She explained:
“The industry can have any opinion that it likes about the taxation system that applies to it. I am not responsible for the opinions of the bingo industry; it can welcome the measures or not. What I am talking about is the effective tax rate.”—[Official Report, 13 May 2009; Vol. 492, c. 978.]
With the best of possible intentions, I advise her second successor to take a more conciliatory line. The Treasury figures would have only begun to make sense if the Government had won the ongoing appeal in the High Court. We took the view that the Government were seeking to pre-empt the Court’s decision and tabled—and voted on—an amendment seeking to delay the changes until the legal position became clearer.
Only a few weeks later that argument already seems vindicated. Since we debated clause 20, the High Court has ruled against HMRC. The Government have lost their case. In the Court’s view, the VAT that clause 112 proposes to lift from interval bingo should never have been applied in the first place. That is the crux of the matter. Furthermore, the ruling has also been interpreted as giving strong support to the view that VAT on any form on bingo is impermissible under EU fiscal neutrality rules.
I was interested to read The Times’ City Diary on 9 June, which commented:
“With further claims amounting to £50 million in the pipeline from Rank and as much as £500 million from the wider gaming industry, it is not hard to work out why HMRC launched a cynical pre-emptive strike on duty in the Budget.”
The Government have proven themselves to be the enemy of the bingo sector and of hundreds of thousands of bingo players up and down the country.
Mr. Brian Binley (Northampton, South) (Con): Does my hon. Friend agree that this is a growing tax that is hated up and down the land? I have heard many people, many of them elderly ladies who derive great pleasure from this hobby, who feel really hard done by.
Mr. Hands: I thank my hon. Friend for that intervention. I will shortly discuss the demographics of bingo. He makes a very strong point. I was intrigued to see the ongoing campaign on the issue. The campaign organisation has produced a bingo board with the faces of all of the relevant Government Ministers. It blots out the faces of all the Ministers who have left since the Finance Bill was published. There are a number of full houses and lines due to the incredible comings and goings we have seen across the Government since the Budget on 22 April.
It would be extremely helpful, for the purposes of the debate, if the Minister could indicate whether HMRC will be appealing the High Court’s decision. It has only a few days left in which to do so. It would be helpful for contributors to the debate to know whether the ruling will actually be appealed. Would she like to intervene at this point?
The Exchequer Secretary to the Treasury (Sarah McCarthy-Fry): I am more than happy to intervene. There are some important legal points to consider, and the decision to appeal has not yet been made. I recognise that time is of the essence, and a decision will obviously be made before the date.
Mr. Hands: I thank the Minister for that intervention. We would all hope that a decision would be made in the required time. It expires in the next few days. If I remember correctly, the High Court ruled more than two weeks, or maybe even three weeks ago. There are only a handful of days left.
Sarah McCarthy-Fry: We have until 30 June.
Mr. Hands: I thank the Minister for that intervention. The clock is ticking. Today is the 27th. [Hon. Members: “25th.”] It is the 25th, I apologise. There is less than half a business week, which is a terribly long time in the world of the Treasury. Who knows what might happen in those few days? I digress. I found that answer very interesting.
Mr. Peter Bone (Wellingborough) (Con): Given what has just been said, is it unfortunate that we are discussing this clause now? Unless my hon. Friend is intending to speak until after 30 June, would it not be better—[Laughter.] I cannot give way. My point is that it is unfortunate that this is being discussed now.
Mr. Hands: It would be beyond the scope of my contribution to debate the timetable. Today is scheduled as the last day. I suspect that bingo may come back at a later stage in the consideration of the Bill. I hope that we will have a chance to consider the implications of the Government’s decision, assuming that they do make one.
During the debate on clause 20, I questioned the Government’s figures on the cost of removing VAT from participation fees, which is what we have in front of us today—in other words, the theoretical rather than the actual cost of the clause. We need to look at both, bearing in mind what has been happening in the industry in relation to paying VAT. We need to look at the cost at the moment, assuming that VAT was being paid in all areas. Since the debate on clause 20, we have more information, via answers to written questions, on how the Treasury arrived at its figure of £50 million. On 18 May, the Financial Secretary, who is with us this morning, replied that the cost of removing VAT on mainstage bingo, which is the standard form of the game, was £20 million. In one of the few acts during her short-lived return to the Treasury, the Minister’s immediate predecessor, the hon. Member for Burnley, added on 10 June that the cost of removing VAT on interval bingo, which is the newer form that the High Court ruled on, was £25 million. Both figures account for the effect on duty revenue. That makes £45 million in total, compared with the figure of £50 million in the Red Book. I assume that the remaining £5 million relates to participation fees on so-called equal chance games other than bingo, principally poker, which, as I mentioned at the beginning, is affected by clause 112. Will the Minister confirm the figures? It has been difficult for me and some of my hon. Friends, notably my hon. Friend the Member for Bournemouth, East (Mr. Ellwood), to get to the bottom of the figures. I would be grateful for clarification of whether the £50 million is the 25-plus-20-plus-5 that I just outlined.
The estimates for 2009-10 back up the argument I made during debate in the Committee of the whole House, that the industry will in practice pay more as a result of the Bill. We are not aware of any major operator paying VAT on interval bingo at present. After the Court ruling, it is hard to believe that any operators would contemplate doing so. A number of operators are withholding VAT receipts on mainstage bingo, feeling—as may turn out to be correct—that mainstage bingo is equally affected by the ruling. That number would, I believe, now swell. It is reasonable to conclude that actual receipts would have been below £20 million for the 2009-10 financial year before the Court ruling and could now potentially be zero—so not the £50 million that is outlined in the Red Book.
Going back to clause 20 for a moment, the Red Book shows that the increase in bingo duty is expected to raise £35 million. Far from reducing the effective tax rate, as the Minister’s predecessor insisted, the Government’s proposals constitute a tax hike of at least £15 million. I would be grateful for confirmation of that figure.
I am not sure why the Financial Secretary said the following during the Budget debate:
“Overall, the announcements in the Budget on the taxation of bingo are welcome to the industry.”—[Official Report, 23 April 2009; Vol. 491, c. 434.]
I found that extraordinary at the time and, in retrospect, it has become even more so. Perhaps he can now understand why the industry reacted so vociferously. An article in the The Sun on 9 June was headlined in typical fashion, “Hands off our balls”. That headline was not referring to me, unlike the other headline “Hands catches Balls” which related to terrorist finance and yet another previous Treasury Minister. The headline in The Sun to which I referred was purely about bingo. The chief executive of Rank said:
“Bookmakers, the football pools, provincial casinos all pay just 15 per cent—yet we are hit like this. What I find most staggering is that bingo players are typically in Labour heartlands. Yet we have had more support from Conservatives, the SNP and the Lib Dems than anyone in Government.”
9.15 am
Four members of this Committee seem to agree with the chief executive and have signed early-day motion 1569, which effectively calls on the Government to rethink their position on raising bingo duty. When I checked yesterday, some 67 Labour MPs had signed the motion. The Government have even managed to unite all of the bingo operators. The “I’m backing bingo campaign” combines the Bingo Association, Mecca, Gala, Castle, Buckingham, Club Grand, Carlton, Opera and Cosmo, and all are opposed to the Government’s plans. Many hon. Members will already have received letters from constituents who play bingo. As I understand it, there will even be a bingo rally in Parliament square, which we can all look forward to.
Bingo clubs must be seen in their proper perspective. As my hon. Friend the Member for Northampton, South said, bingo plays an important role in the lives of the many and not the few. The Government’s crass approach to bingo in this year’s Budget has upset bingo players up and down the country. As my hon. Friend the Member for Bournemouth, East pointed out in the debate on Second Reading, some 8.5 million people in this country play bingo each year. More than 200 Members of the House have a bingo club in their constituency. Regrettably, I am no longer one of them. Mecca Bingo on Vanston place in Fulham closed just a couple of years ago due partly, I believe, to the pressures facing the industry, about which I will be talking. The bingo clubs have a lot of members. I met Rob Halfon, the Conservative parliamentary candidate for Harlow, recently, and he told me that there were 42,000 members of the Harlow bingo club. In a Westminster Hall debate in February, the hon. Member for Birmingham, Yardley (John Hemming) told the Chamber that there were 83,000 members of a club in his constituency.
Just to return to Harlow for a moment, when my hon. Friend the Member for Hertford and Stortford (Mr. Prisk) and Rob Halfon visited the club, I am told that almost 200 players were hard at it in the middle of the day. So, we are talking about incredibly popular facilities. My hon. Friend the Member for Crewe and Nantwich (Mr. Timpson) talked in that same debate about his Mecca bingo hall in Crewe. He said that 33 employees deal with, on average, 2,500 visits each week, and the club has some 12,500 members.
 
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Prepared 26 June 2009